Cost Accounting

NESTLE INDIA LTD. GOOD FOOD, GOOD LIFE

COMPANY PROFILE  

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Name of Company : Nestlé India Limited Head Office: Nestle House, Jacaranda Marg, "M" Block, DLF City, Phase II Gurgaon - 122002 (Haryana) Registered office: M-5A,Connaught Circus, New Delhi-110001 CMD: Mr. Martial G. Rolland First factory set up in INDIA in 1961 at Moga, Punjab.

OVERVIEW 

The company’s principal activities are to manufacture & distribute food products. Food products include milk & nutrition, beverages, coffee, blends, tea, cream, chocolate, cereals & cooking aids. The company’s plants are located at Moga, Samalkha, Nanjangud, Choladi, Ponda, Bicholim & Pantnagar. The products of the

PRODUCTS

PRODUCTS

Maggi Tomato Ketchup 

MAGGI offers a wide range of specialty Indian Sauces which are relished for their unique taste. Available in the following delightful variants: Tomato Ketchup, Tomato Sauce, Tomato Chilli, Masala Chilli, Chilli Garlic, Tamarina, Tomato Chatpat, Tomato Pudina and the all-time-favourite MAGGI Hot & Sweet Sauce.

Maggi 

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Maggi was the upstad newcorner who came in with a loud aggressive national burst. It did not come in with one, but with a range of sauces in order to increase market share and axpand the market by offering more usage occasions, bring consumers with different needs into the Maggi Sauces fold and weaning away users of different brands to Maggi. From a market share of 14% in 1985, Maggi Sauces now enjoys a share of about 50% of the market. The success of Maggi can be most importantly attributed to year-round media activity, and the humorous "it's different" campaign on Maggi Hot and Sweet sauce - this campaign had such an impact that it literally promoted the entire range of Maggi Sauces.

Maggi Market Place 

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There has always been a presence of good additives in the Indian household. The traditional Indian main meal has chutneys and pickles as additives while the quasimeals, where snacks or ready to eat food is consumed, use sauce as an additive. Prior to Maggi Sauces launch in 1985 the scenario of the branded and unbranded sauces market was such that the Tomato ketchup was most popular in the market with 80% market leaving the remaining 20% for others. IMAGE : SAUCES

The Brand 

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The Maggi Sauces brand has reallY been built by creating a new segment in 1989-90 by focusing on Hot and Sweet as a new speciality sauce. The most important aspects of Hot and Sweet were (i) Brand Image : Young Teenager, Ever changing, humorous, unpredictable and "whacky" (ii) Brand Positioning : Hot and Sweet was a tomato chilli sauce that was different.

The Consumer  

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Profile of users and non-users Sauce is a product that cuts across all age groups and regions and therefore broadly the target group was All Adults with Rs. 2500/-+ MHI, in Class I+ towns. Who buys the Product, How and When ? Sauces follow two purchase patterns, In regular sauce households, it is purchased at the beginning of every purchase cycle when monthly nondurable items are bought. The second group is of those households where sauce has an occasional use, it is usually an impulse puchase, from the local retailers and the main purchaser is the housewife with key influencers being children. The users can be further subdivided between Tomato Ketchup and specialty sauces such as Hot and Sweet. Tomato Ketchup is for all members of the family (MHI : Rs. 2500+) with the larger part of the consumption coming from children. The purchaser is however the housewife. Hot and Sweet is targeted at the young adult, modern, with MHI : Rs. 2500+. The purchaser could be the housewife or the male/female 'adult'. Users attitude to category/brand Tomato Ketchup is generally seen as fun to eat, adds flavor to all kinds of food, and is convenient to use. Users show low involvement, low brand loyalty, are very sensitive to price, appreciate 'premium' quality of Maggi, but are unwilling to pay very large price premium. On the other hand for Hot and Sweet, the frequency of consumption is lower with high band

Cost Accounting 

cost accounting is that part of management accounting which establishes budget and actual cost of operations, processes, departments or product and the analysis of variances, profitability or social use of funds.

Cost Sheet 

It serves as a means of accumulating the manufacturing costs-direct materials, direct labor, and overhead costschargeable to the job or department and as a means of determining unit costs.

Methods Of Costing 

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Job Costing - This is done, as the name suggests, on job works which may differ from case to case basis. By giving different job numbers and debiting the costs on the jobs, cost of each job work can be ascertained. Contract or Terminal Costing - This is done for large contracts. Such businesses need not maintain costs separately as financial accounting will indicate the costs and expenses. In such contracting firms, the cost sheets are maintained for individual contracts. In the absence of expense budgets, inefficiencies are often hidden in such cost sheets. Process Costing - This is useful when a product passes through various processes, yielding different by products of commercial value. This is useful in industries like refineries.

Methods of Costing 

Standard Costing: Standard costing means assigning the expected, budgeted costs to the goods manufactured, the goods in inventory, and the goods sold. In other words, the amounts assigned are the costs that should occur when manufacturing products.

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Marginal Costing: It is a costing technique where only variable cost or direct cost will be charged to the cost unit produced. Marginal costing also shows the effect on profit of changes in volume/type of output by differentiating between fixed and variable costs.

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Activity Based Costing :Activity based costing (ABC) assigns manufacturing overhead costs to products in a more logical manner than the traditional approach of simply allocating costs on the basis of machine hours. Activity based costing first assigns costs to the activities that are the real cause of the overhead. It then assigns the cost of those activities only to the products that are

PARTICULARS

DIRECT COST Direct Raw materials: Opening stock Add: Purchase Less: Closing stock Packing material consumed Direct labour Direct expense PRIME COST Add: FACTORY OVERHEAD Power & fuel

Rs (In Rs (In Thousands) Thousand s)

760746 14391229 (1240513)

1391146 2 2784775 2454121 1915035 8

1239442

Maintenance & repairs: Plant & machinery

49264

Building

30507

General

42338

Workers training expenses Consumption of store & spare parts

17376 2 11268 2

Depreciation

27114

Other expenses

96860 2643709 0 21794067

Works cost

Opening Stock (WIP)

384758

Less: Closing Stock (WIP)

424279

ADMINISTRATIVE EXPENSES Contribution to PF and other funds

(39521) 21754546

86660

Staff Welfare Expenses 153645 Rent

181615

Rate and Taxes

173762

Insurance

22344

Employees Welfare

348579

966605

COST OF PRODUCTION Opening Stock (FG) Less: Closing Stock (FG) COST OF GOODS SOLD SELLING AND DISTRIBUTION Freight Transportation and distribution Advertisement TOTAL COSTS Profit Total Sales

22721151 1406559 1977141

(570582) 22150569

1608368 1722059

3330427 25480996 10990836 36471832

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